# Glossary¶

When you start diving into the Hummingbot ecosystem, you'll probably encounter some unfamiliar terms and phrases along the way. To help you on your journey, we've defined some of the most common trading vocabularies here in this handy cheat sheet.

## Base asset¶

The asset in a trading pair whose quantity is fixed as a single unit in a price quote. For example, in a price quotation of ETH/DAI 100, ETH is the base asset and 100 is the amount of DAI exchangeable for each unit of ETH.

In Hummingbot, the first token in a trading pair is always the base asset. See quote asset for more info.

## Centralized exchange (“CEX”)¶

An exchange which is operated by a central authority. In addition to order matching and broadcasting, the centralized exchange keeps custody of users’ assets.

## Decentralized exchange (“DEX”)¶

An exchange which operates in a decentralized way, using smart contracts to facilitate the transacting in and settling of assets. Generally, one distinguishing feature of a decentralized exchange is that participants keep custody of their own assets in their own wallets; the DEX facilitates the direct wallet-to-wallet settlement between counterparties in a transaction.

## Maker¶

A party that places maker orders, and in doing so, provides liquidity to the market.

## Maker order¶

A “limit order”; which is an order to buy or sell an asset at a specified price and quantity. Executing this order is not guaranteed; the order is only filled if there is a taker that accepts the price and quantity and transacts.

## Order book¶

A list of currently available (maker) orders on an exchange, showing all of the current buyer and seller interest in an asset.

## Quote asset¶

The asset in a asset pair whose quantity varies and whose quantity is denoted by the numerical figure of the price quote. For example, in a price quotation of ETH/DAI 100, DAI is the quote currency and 100 units of DAI are referenced in this exchange.

In Hummingbot, the second token in a trading pair is always the quote asset. See base asset for more info.

## Taker¶

A party that places taker orders, which execute immediately and fill a maker order.

## Taker order¶

A “market order”; an order to buy or sell a specified quantity of an asset which is filled immediately at the best available price(s) available on the exchange.

## Mid price¶

The average of best bid and best ask price in the orderbook.

## Hedging price¶

In cross exchange strategy, is the net cost of the other side of your limit order i.e., the cost of you making a taker order.

For example on your taker market, if you can buy 25 tokens for say a net price of $100 (other market makers have limit sell orders at a net price of 100 for all 25, e.g. 7.5 @$99, 10 @ $100, 7.5 @$101), then on your maker side, you would place a limit sell order for 25 @ $101 (assume 1% min profitability). If someone fills your sell order (you sell at$101), you immediately try to hedge by buying on the taker side at \$100.

Last update: 2021-12-15